Vista Outdoor Inc.

ladies and gentlemen hello and welcome to the fourth quarter fiscal year 2023 vista outdoor earnings conference call my name is maxine and i'll be coordinating the call today if you would like to ask a question during the presentation you may do so by pressing star followed by one on your telephone keypad i will now hand you over to tyler lindwall vice president investor relations to begin tyler please go ahead when you're ready thank you operator

and good morning to everyone joining us for our fourth quarter fiscal year 2023 earnings call. With me this morning is Gary McArthur, Interim Chief Executive Officer, Jason Vanderbrink, CEO of Sporting Products, Jeff McGuane, President of Action Sports, and Andy Keegan, Vice President and Interim Chief Financial Officer. Before we begin, I'd like to remind everyone that during today's call, we will be making several forward-looking statements and we make these statements under the safe harbor provisions of the Private Securities Litigation Reform Act. These forward-looking statements reflect our best estimates and assumptions based on our understanding of information known to us today. These forward-looking statements are subject to the risks and uncertainties that face Vista Outdoor and the industries in which we operate. We encourage you to review today's press release and Vista Outdoor's SEC filings for more information on these risk factors and uncertainties. Please also note that we have posted presentation materials on our website at investors.vistaoutdoor.com, which supplement our comments this morning and include a reconciliation of non-GAAP financial measures. Gary, I'll turn it over to you.

Thank you, Tyler, and thank you all for joining us this morning as we discuss our fourth quarter and fiscal year 2023 results. This is my second earnings call as VISTA Outdoors interim CEO, and I am excited to share with you the strides we have made since we last spoke in early February. Let me begin by thanking all VISTA Outdoor employees for their hard work during the quarter and year. As a result of the worsening economic environment with increasing inflation, decreasing consumer demand, and increasing federal fund rate, which resulted in reduced forecasts and increased discount rates. During the fourth quarter, as part of our annual impairment testing, we took a non-cash goodwill and indefinite life trade names impairment of $374 million. My remarks for the remainder of this call exclude that impairment. For the call, there are five core things I will highlight. One, our financial performance continues to be solid in these challenging times. Two, fourth quarter costs and earnings improvement actions better position the company for fiscal year 2024. Three, outdoor products is expecting a challenging first half of fiscal year 2024 with an improving back half while sporting products is expecting a more normalized purchasing cycle. throughout the fiscal year. Four, we are committed to and working hard to be ready to spend later this calendar year. And five, our future is bright. Let me first turn to our financial performance. Sales for the fiscal year topped $3 billion, with both segments increasing year over year. Our adjusted EBITDA margins were 20%, a solid performance as we navigated a market. that have seen multiple inflationary pressures and higher input costs. We also generated strong adjusted free cash flow of $493 million during the year. Our leverage ratio is now 1.6 times, well within our long-term target of one to two times. And we will continue to prioritize maintaining a strong balance sheet. Organic sales for fiscal year were $2.7 billion, and our organic EBITDA was $574 million. Sales for the fourth quarter were $741 million, down 8.4%, and adjusted EBITDA was $120 million, and adjusted EBITDA margin was down 618 basis points. Organic sales were $654 million, down 19.1%, and organic EBITDA was $118 million. Organic EBITDA margin was down 438 basis points. Sales for sporting products are expected to normalize in the high $300 million range with EBITDA margins of low 30s near term with expectation EBITDA margins will move downward in the back half of the year to the mid 20s. These levels are well above pre-pandemic. Outdoor products faced a very challenging market in the second half of fiscal year 2023. With expectations this will continue at least through the first half of fiscal year 2024. Sales for outdoor products in the fourth quarter were $327 million, down 5%, while organic sales were $241 million, down 30.2%. EBITDA and organic EBITDA margins were both around 3%. Adjusted free cash flow in the quarter was very strong at $178 million, which included an IRS refund of over $40 million. Andy will provide additional details on our financial results from our fiscal year and fourth quarter shortly. Let me now talk about cost and earnings improvement actions. Due to the macroeconomic headwinds and organic declines experienced in our outdoor product segment, we launched a more than $50 million cost reduction and earnings improvement program in our fiscal fourth quarter. Actions included office closures, spending cuts, operating income improvements, headcount reductions across our brands and corporate teams, and acceleration of the Fox and Bell Juro integration. These tactical and strategic actions position us to achieve meaningful margin improvement as we head into fiscal year 2024, bolster our already solid financial position, and ensure a compelling financial profile for each segment on a standalone basis post-FIN. Our strong adjusted free cash flow in the full year also shows the resiliency of our company and operating model despite challenging market and macro conditions. As a prime example, we paid down $170 million of debt during the fourth quarter and $260 million in the back half of fiscal year 2023. Looking ahead to fiscal 2024, In outdoor products, the short-term market is challenged, but as a result of the cost and earnings improvement actions taken, we are better positioned to capitalize on long-term tailwinds. Point of sale continued to exceed all sell-in for most of our business units through the fourth quarter. We are beginning to see improvement in retail inventory levels from quarter to quarter. However, retailers have been cautious in open-to-buy orders. and of adding additional inventory. We expect this trend to continue through the first half of the fiscal year for many of our brands. The record-setting snow season in the western states was a boon for our general snow business, but history shows that long snow seasons delay the start of spring and summer camping and outdoor trips. This year is expected to be no different. We see a return to organic growth in the back half of fiscal year 2024, once point of sale and sell-in become more closely aligned. And longer term, we continue to be bullish about the future of the outdoor recreation industry. It's participation that remains above pre-pandemic levels and our brand's strong positioning in the marketplace. In sporting products, the market is normalizing, as we have expected and communicated. And we anticipate a more normalized purchasing cycle throughout fiscal year 2024 based on stable market pricing and demand. We expect increasing material costs and we are seeing certain calibers selling at lower volumes. Sporting products EBITDA margin profile is expected to bottom at or above the 25% target communicated at our investor day last year. driven by more rational pricing and better structural dynamics in the market versus previous cycles. Year-to-date mixed checks through April are also up 25% compared to the same period in 2019 and remain above 1 million checks per month. Jason will provide additional detail on sporting products in a few minutes. Let me now address the separation. We continue to believe the spinoff of outdoor product segments is the best way to unlock shareholder value. And we are working hard to be ready to spend later this year. Either completing this in this calendar year will be establishing the outdoor product senior leadership team, a more stable macroeconomic environment and improving outdoor products financial performance. Upon completion of the spin, there will be two independent publicly traded companies, both of which will be two of the largest public traded companies in the outdoor space. Each company will have a dedicated strategic focus, tailored capital allocation approaches, and its own set of competitive advantages. Our company currently trades about five times enterprise value to fiscal year 2024 EBITDA, in line with ammunition and sporting company peers. While pure play outdoor products focused peers tend to trade at double digit enterprise value to EBITDA, we believe this value is not being reflected in our current trading price. And after the spin, we expect that our outdoor product segment should move towards trading at similar multiples to its outdoor peers. We continue to have discussions with the SEC and are in the process of updating our Form 10 with our fiscal year 2023 Q4 financials. We expect to publicly file the Form 10 in advance of the spin. We will have additional details on timing the new company names and more in the coming months. With regards to outdoor product CEO search, the retained executive search firm continues to interview a strong pipeline of quality internal and external candidates. Our criteria includes someone who has a proven track record, who has shown the ability to deliver value to shareholders, and who can advance our mission of stewarding great brands and getting more people into the outdoors. We believe our candidate pool of internal and external candidates will produce the right leader for the company's next chapter. Moving to our future, beyond the short-term headwinds we're experiencing, We are bullish on long-term recreation trends. Industry participation is baselining well above pre-COVID levels. We have a stable of great brands well-positioned to capitalize. To name a few brand highlights, in golf, recent data shows that there are 3.4 million junior golfers, the highest level since 2006. 36% of junior golfers are girls. which is the highest ever. Leading golf product reviewer, MyGolfSpy, just published their annual list of best range finders. Bushnell Golf earned the top billing with the all-new Pro X3, and the brand accounted for three out of the top five slots overall. Stone Glacier Sky Solace Tent was recognized by Outdoor Life as the best tent for bad weather. And Stone Glacier's expansion into brick and mortar is also accelerating its brand reach, with one major outdoor retailer delivering 100% year-to-date point-of-sale growth. Dabchef is navigating the difficult grilling market, one that is over-inventory and dealing with record-setting snowfall. Dabchef's new smokebox technology has been well-received in the markets. WIATCAT launched the new LINX model, establishing a new category for our leading off-road e-bike brand. Ossies, Primos, Beestinger, and RCBS earned best of recognition in their prospective categories for firearm cleaning products, shooting stick, and ground blinds, stabilizers, and reloading dyes across a variety of leading publications and reviewers. Its sporting products new products from federal and remington collected prestigious industry awards american rifleman presented its golden bullseye to remington's core lock tipped and shooting illustrated awarded its ammunition of the year to federal's 30 super carry jeff will cover wins and updates in our action sports business looking ahead we remain excited about the future our iconic brands strong business unit leadership team, talented employees, and solid financial foundation position us for success in fiscal year 2024 and beyond. With that, let me turn it over to Jason.